Quadrix Favorites: Nine Top ETFs

09/25/2014 9:00 am EST

Focus: FUNDS

Richard Moroney

Editor, Dow Theory Forecasts

Our fund-rating system favors low-cost funds with solid track records, while our Quadrix stock-rating system favors stocks with strong fundamentals and reasonable valuations. By using the systems in concert, we uncovered nine top exchange traded funds (ETFs), says Richard Moroney, editor of Dow Theory Forecasts.

We used Quadrix to evaluate ETF portfolios based on their individual holdings. Quadrix’s predictive power gives us increased confidence when gauging a fund’s total-return potential.

Finding the perfect ETF is an impossible task, as no fund excels in all factors that go into our rating systems. Still, we identified nine truly high-potential funds that possess several key qualities:

  • Outstanding scores in our fund-rating system. All nine funds earn scores of at least 93, meaning they rank better than about 93% of their peers.

Percentile ranks, which cover nearly 5,000 mutual funds and ETFs spanning 110 categories, are calculated monthly using total returns, expense ratios, tax-efficiency, and risk-adjusted performance.

  • Average scores for Quadrix Overall and Value—the two most effective scores in our stock-rating system—that exceed peer-group averages.

  • Returns that outstrip peers. All nine ETFs have outperformed their categories based on one- , three- , and five-year total returns.

  • Reasonable expense ratios—a solid predictor of relative performance. The nine funds average expense ratios of only 0.35%, with two funds charging less than 0.15%.

We screened for ETFs with outstanding scores in our fund-rating system and underlying holdings with strong scores in our Quadrix stock-rating system:

Large-cap ETFs

WisdomTree Earnings 500 (EPS)—Blend
Vanguard Mega Cap Growth (MGK)—Growth
PowerShares Dynamic Large Cap Value (PWV)—Value

Mid-cap ETFs

WisdomTree MidCap Earnings (EZM)—Blend
PowerShares DWA Momentum (PDP)—Growth
iShares Morningstar Mid-Cap Value (JKI)—Value

Small-cap ETFs

iShares Core S&P Small-Cap (IJR)—Blend
SPDR S&P 600 Small Cap Growth (SLYG)—Growth
Guggen. S&P MidCap 400 Pure Value (RFV)—Value

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